3 Stocks Spiking on Unusual Volume - views

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

DepoMed (DEPO), a specialty pharmaceutical company, focuses on developing products for pain and other conditions, and diseases of the central nervous system in the U.S. This stock closed up 11.4% to $13.43 in Monday's trading session.

Monday's Volume: 3.41 million

Three-Month Average Volume: 672,475

Volume % Change: 371%

From a technical perspective, DEPO soared sharply higher here right above some near-term support at $11.83 with heavy upside volume. This move pushed shares of DEPO into breakout and new 52-week-high territory, after the stock took out some near-term overhead resistance at $13.23. Market players should now look for a continuation move higher in the short-term if DEPO manages to take out Monday's high of $13.80 with strong volume.

Traders should now look for long-biased trades in DEPO as long as it's trending above Monday's low of 12.30 and then once it sustains a move or close above $13.80 with volume that hits near or above 672,475 shares. If we get that move soon, then DEPO will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $16 to $18.

From a technical perspective, LORL trended modestly higher here right off its 50-day moving average of $77.05 with above-average volume. This stock has been uptrending strong for the last month and change, with shares moving higher from its low of $71.86 to its intraday high of $80.31. During that move, shares of LORL have been consistently making higher lows and higher highs, which is bullish technical price action. This spike on Monday is now quickly pushing shares of LORL within range of triggering a big breakout trade. That trade will hit if LORL manages to take out Monday's high of $80.31 to its 52-week high at $82.31 with high volume.

Traders should now look for long-biased trades in LORL as long as it's trending above its 50-day at $77.05 and then once it sustains a move or close above those breakout levels with volume that's near or above 64,146 shares. If that breakout materializes soon, then LORL will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $85 to $90.

From a technical perspective ECOM trended notably higher here right above its 50-day moving average of $42.74 with above-average volume. This stock recently trended back above its 50-day moving average and broke out above some near-term overhead resistance at $43.59 with strong volume. This spike on Monday is now quickly moving shares of ECOM within range of triggering a major breakout trade. That trade will hit if ECOM manages to take out some near-term overhead resistance levels at $47.25 to its all-time high at $49.75 with high volume.

Traders should now look for long-biased trades in ECOM as long as it's trending above $44 or above its 50-day at $42.74 and then once it sustains a move or close above those breakout levels with volume that's near or above 399,108 shares. If that breakout materializes soon, then ECOM will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $55 to $60, or even $65.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.